tv Nightly Business Report PBS October 18, 2011 6:30pm-7:00pm PDT
>> susie: an earnings hit and a big earnings miss after the bell, as intel swings for the bleachers and apple's latest results strike out. also striking out? big banks over new debit cards fees. so where are customers going now? you might be surprised where they're stashing their cash. it's "nightly business report" for tuesday, october 18. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening, everyone. my colleague tom hudson is on assignment. two tech titans out with two different earnings stories after the closing bell today. intel posted strong results and apple surprised investors with a rare earnings miss. this was apple's first miss since 2004. after back-to-back record quarters, apple posted results below analyst estimates. here are the numbers. it earned $7.05 a share. analysts were counting on $7.39. revenues also came in lower than expected, $28 billion dollars-- about a billion and a half below estimates. the problem?
a drop in iphone sales as buyers waited for the new model that was launched last week. investors dropped the stock in after hours trading. shares tumbled more than 6% to $396. in the regular session, apple closed at a record high of $422.24. investors were buying up intel in after hours trading on its powerful profit picture-- shares were up as much as 5%. the chip maker earned 65-cents a share, 4-cents more than analysts thought. revenues surged 30% to more than $14 billion. it's the first time quarterly revenues have topped $14 billion. intel chief financial officer stacy smith says there were two factors driving that growth. >> we saw double-digit unit growth in p.c.s and notebooks were, you know, quite strong. and the other side is, you have all of these devices that are computing connecting to the
internet-- p.c.s, tablets and phones-- and they're driving a build out of the server infrastructure to support all of those devices and we're uniquely positioned to benefit from that trend. our data center group was up 15%. >> susie: while tech companies dominated after hours, investors focused on the financials earlier in the day and goldman sachs was in the spotlight. the giant investment banking firm reported a quarterly loss, its second ever loss since going public 12 years ago. here are the numbers. goldman lost 84 cents in the third quarter. analysts were expecting a smaller 16 cents. revenues tumbled 60% to $3.6 billion, also missing estimates. c.e.o. lloyd blankfein blamed the quarterly loss on difficult market conditions and the lack of confidence among investors and corporate clients. for more on goldman's dismal quarter and the outlook for the stock, let's turn to tonight's "street critique" with hilary kramer of gamechangerstocks.com.
>> so hillary, you have always liked gold. you raved about it in our programme many times. how due feel about it now. >> i still love goldman sachs, and i'm more optimist k than ever, but investors are finally seing it my way. >> how is that. what do you mean? >> goldman sachs trades as a huge discount to tangible book value. basically it's undervaulted. think about it. financials have gotten so badly hurt. goldman sachs like all the other investment banks tend to see most of the acquisition and requisitions in the father quarter, and they're backlogged with deals analysts digested the news about goldman sachs $393 million loss figured out that the fourth quartered is going to be a blowout quarter, especially if underwritings california back, susie.
500 companies are waiting to go public, and as soon as you see an opening, banks like goldman sachs are going to bring them public again. >> susie: are you saying you were buying goldman today? also, where do you see the target? the stock was trading at $175 in january. what's your target on it? >> i believe goldman could certainly get back above $200, but it could be a two year process to get there. but don't be surprised if it moves very quickly right now more towards the 150 level where it was in the early spring. >> susie: let's talk about morgan stanley. that's another one of your favorites mook the financials, and it's reporting earnings tomorrow. what are you expecting? what's your view on the stock? >> morgan stanley is going to deliver the same way. there might be disappointment with trading revenue, and private equity transactions. they have to be written down, but morgan stanley should surprise to the upside. the stock was up 9% today
during the day, and that's a reflection of what everyone is expecting to hear. really positive guidance as in the fourth quarter, and all the mergers are happening. >> susie: and nlt process what's happening? i know you haven't been a fan of big banks but citi's stock was up sharply. any change of heart >> no, i choose the investment banks. goldman sachs, morgan stanley. the one that is make these large margins on these big transactions and underwriting efnew. it's tougher, even though i love citigroup, j.p. morgan, mortgages are a hang over. thal take time. and citigroup is appealing because of international expansion, and the ceo is executing so well in places like india and china. >> susie: we have to talk about apple. now the numbers were very
disappointing as we reported at the top of the program. you sold your shares of apple not so long ago. give us your reaction about those apple numbers. >> apple's numbers weren't surprising to me at all. they still were excellent. sales are up 39%, and the expectation is for $38 billion in sales in the next quarter, but the problem with apple is that at a certain point, growth just has to slow down to some extent. the street is spoiled and there's a herd mentality. and as soon as a growth stock stalls, a sellout takes place. the biggest worry is when it's the bottom line and not the top line. the problem here is the sales were the issue. i'm expecting a problem when the margins start becoming a problem because of competition from others. >> susie: are you a buyer of apple at 396? >> no. i'd wait. it's not expensive stock,
susie, but i'd wait for it to get cheaper before buying. >> susie: before we wrap up, what's your sense of the tone of the markets. we have triple digit gains and yesterday triple digit losses. what's your take on the markets right now? >> there's a lot of concern out there about europe, and there's a lot of knee jerk reactions going on, but much of the problem has to do with etf trading and program trading. that's what causes this whip sawing. and that upsets investmentors and other investors. some of it is just technical in nature, but i think the whole world is waiting for sunday, susie when 27 leaders in europe get together and decide the fate of greece and europe. >> susie: and before we go, hillary, any disclosures on the stocks we discuss today? >> yes. i own morgan stanley and i own goldman sachs. i do not own apple, as you know. >> susie: thank you so much, hillary, great talking to you as always. >> thank you, susie. >> susie: and you can see
hillary. >> susie: high hopes about a bigger european bailout fund fueled a late day rally on wall street. investors bought up stocks in the last hour of trading on word that france and germany agreed to boost the euro-zone's rescue fund. the dow surged 180 points, the nasdaq jumped 42 and the s&p 500 added 24. as for volume, just over a billion shares moving on the big board and just under two billion on the nasdaq. still ahead, with the nation's biggest banks launching new fees for debit card purchases, more and more americans are turning to an old standby, the credit union. top republican presidential hopeful herman cain is pushing for major reform of the tax code, but analysts aren't eating up the pizza legend's 9-9-9 plan for tax reform.
in last night's program, our commentator outlined the problems. today, for the other side, washington bureau chief darren gersh talks to campaign officials and experts about the controversial proposal. >> reporter: herman cain's 9-9-9 plan would not only dramatically simplify taxation in the united states, it would also turn the burden of paying for the federal government on its head. in a new analysis, robertson williams of the tax policy center says the cain plan is a large tax increase on the middle class. >> unless you are giving a substantial amount to charity-- that's the one deduction that's left in the cain plan-- you'd be stuck with paying 25% of your income in taxes, and relative to today's 12%, that's twice as much. >> reporter: the tax policy center's analysis found the cain plan would give the very richest taxpayers an average tax cut of almost $1.7 million. a typical middle class taxpayer would pay about $3,000 more. low-income americans would be hit hard. instead of getting tax rebates,
they would face a tax increase of almost $1,700. >> a very, very big increase for people who don't have very much to begin with. >> reporter: at the opposite end of the income scale, the rich would make out like bandits. their incomes would rise by more than a third in terms of after tax income. >> reporter: but cain economic adviser rich lowrie disagrees. >> the giant sound that you hear is the sound of knees jerking. >> reporter: lowrie says the 9- 9-9 plan will create six million jobs while making the tax code fairer. >> we are going to tax everybody the same at 9%. you make a million times more, you pay a million times more. that's our definition of fairness. >> reporter: but even the powerful anti-tax activists at americans for tax reform have turned against the cain plan, saying it opens the door to higher taxes in the future. >> the 9-9-9 plan, while having some very good features, like low tax rates, like a much simpler system, is fatally flawed because it has two brand- new sales taxes that are put in place in america-- a national
retail sales tax and a vat. either of those over time could turn us into the basket cases that we see in places like greece and portugal and italy, and if we put both of them in place, it's almost certain that that's america's fate. >> reporter: but the cain campaign says that analysis ignores the taxes his plan eliminates. >> we're taking out all corporate income taxes, we're taking out all personal income taxes. we're taking out all payroll taxes. we're taking out the capital gains tax and the death tax. >> reporter: lowrie says all the details on the 9-9-9 plan are not out yet. by the end of the month, the campaign intends to release its plan to expand empowerment zones and lower the tax burden on the poor. darren gersh, "nightly business report," washington.
>> susie: from the opening bell to the closing bell, quarterly earnings were the big topic of the day. let's take a closer look with tonight's "market focus." as we reported, besides apple and intel, there was yahoo. it turned in a lackluster quarterly report and there's speculation that could increase the pressure on the company to sell itself in parts or as a whole. yahoo earned 23 cents a share, six cents more than estimates. it the first report since carol bartz was fired as c.e.o. last
month. revenue came in at just over a billion dollars, in line with estimates. yahoo shares were down fractionally in the regular session and in after hours they were up as much as 3%. bank of america was the dow's big gainer of the day, thanks to a solid third-quarter report. it earned 31 cents a share, 12 cents better than wall street expected. revenue in the latest period improved 6.5% to $26 billion. nearly all the gains came from accounting and the sale of a stake in a chinese bank. the bank set aside less money for losses as more americans got their financial houses in order. shares rose 10% today to $6 and change. from the best to the worst performer-- i.b.m. it was the dow's biggest loser. today's 4% drop pulls the stock off an all-time high. two other dow components reported earnings today, coca- cola and johnson & johnson. the soft drink giant beat expectations but the shares closed down fractionally lower.
j&j's quarterly profit fell 6% thanks to generic competition and recalls. the stock was up 1%. in other health care news, shares of human genome sciences climbed on a report it may be acquired by glaxosmithkline. both companies jointly sell a recently-launched lupus drug. h-g-s-i shares rose 14%. g-s-k inched up a fraction. medical device maker hospira got a big dose of selling. the company cut its full-year guidance because of a production slowdown linked to quality issues at a north carolina plant. shares of h-s-p were down 21%, making it the worst-performing s&p 500 stock. and finally, there was some encouraging news on the housing front and investors moved in. a real estate trade group said builder sentiment is up this month. homebuilder stocks were helped by that sentiment number. shares in toll brothers, ryland
and pulte each easily vaulted over 10%. and that's tonight's "market focus." as big banks record billions of dollars in profits, many americans are getting fed up with rising bank fees. in some cases, customers are closing accounts. many are moving their business, surprisingly, to credit unions. erika miller looks at the trend and why it's likely to continue. >> reporter: they are people like gabe albarian. >> the tipping point was just the announcement of these new fees for debit cards. the debit card fee is really a fee that they shouldn't be charging. >> reporter: and rob bedell... >> i was seeing more and more charges coming through, and you know, nickel and diming. $5. $10. and they started to increase to $29 to $35. it just got out of control. >> reporter: as bank fees grow, so do the number of people switching to credit unions seeking better deals. municipal credit union is the
largest credit union in new york state with 320,000 members. c.e.o. kam wong thinks membership will continue to grow. >> historically, we have increased approximately 5% annual basis. i'm projecting up 8% this year, especially last quarter of this year. and then next year, i think we will stabilize at 8% to 10% increase. >> reporter: there are a few reasons credit unions do not expect a mass exodus out of traditional banks. first, many customers don't want the hassle of switching. another drawback to credit unions is they have fewer branches and a.t.m. locations. and then of course, there's the matter of qualifying for a particular credit union. many have tight requirements to join. >> we have to have a special relationship, so to speak. in our case, it's the city, state, federal government workers and health industry employees.
so not everyone can just walk in to our branch or branches and open an account. if you want to find out the credit unions you qualify for, a good place to start is culookup.com. there, you can also compare rates between credit unions and banks. credit.com's adam levin says big banks are in the midst of a fee frenzy that will ultimately drive away more customers. >> you have account closing fees, debit card fees, overdraft fees. you have minimum balance fees. you have, in some cases, reward restoration fees. foreign transaction fees. a.t.m. fees. the list goes on and on and on. >> reporter: but he says avoiding those costs is not the only reason to switch to credit unions. often, they offer better service. >> with credit unions, which are more much more of a community, of a collective, you have a whole different sense of relational banking. everybody feels like they have a stake in the institution.
and that personalized touch is just what credit unions are banking on for growth. erika miller, "nightly business report," new york. >> susie: here's what we're watching for tomorrow: quarterly results from american express and morgan stanley. we'll also see the september reports on housing starts and consumer prices along with the federal reserve's beige book, a survey of regional economies across the u.s. also tomorrow, how recruiting women entrepreneurs could be the key to reviving job creation. >> susie: the nation's seniors will get their first bump in pay in three years this january. the social security administration is boosting its cost-of-living adjustment, or cola, by about 3.5%. most recipients get just under $1,100 a month, so the increase will add almost $40 a month. but for many seniors, that extra money will go to pay higher premiums for medicare. viacom could get a second chance to argue that google's youtube
violated copyright rules and should pay the entertainment company $1 billion. it's appealing a judge's order to dismiss a lawsuit last year without a trial. viacom sued the web giant's video-sharing site for posting copyrighted content like "the daily show" and "the colbert report," but a judge ruled youtube was protected because it removed the videos as soon as it found them. viacom argues those steps are not enough. it's worried the ruling will lead to more copyright abuse on the internet. occupy wall street has spread
occupy wall street has spread across the country to cities like chicago. many of the young protesters say they're worried about jobs and repaying student loans. but some college students are learning about an even bigger debt they may have to pay. diane eastabrook explains. >> my country, love it or leave it. >> reporter: chicago's version of occupy wall street is on lasalle street, where protesters have been demonstrating for weeks against big banks, high unemployment and political gridlock. recently, just a few blocks away, depaul university students sat mesmerized by what a guest lecturer called a more pressing issue. >> the united state for the year ended september 30, 2011, spent $3.5 billion a day every day, including weekends, than it took
in. >> reporter: david walker was the u.s. comptroller general under presidents clinton and bush. now he often tours college campuses railing against the nation's $14 trillion debt. he calls it a mortgage against the future of younger generations. >> you need to understand what is being done to you rather than for you right now. >> reporter: with the unemployment rate north of 9%, jobs seem to be a much bigger concern for twenty-something protesters than the national debt. but walker says when he displays charts projecting future deficits and their potential consequences, students often are stunned. >> young people are going to face a government that is going to do less, but is going to ask them to pay more in taxes. how many people think they're going to get social security? raise your hand. i don't see too many young people raising their hands. >> reporter: when it comes to social security walker offers encouraging words, even though the program's $8 trillion in the hole. he thinks the system can be made
whole for younger generations if the retirement age is raised and other tweaks are made. >> you can strengthen the benefit, raise it for people near the poverty level and over 85. you can reduce the promised benefit for people who are in middle or upper income. you can raise the taxable wage base cap from $106,800 to $150,000. for many of the students here walker's words were a wake-up call. >> now i see that my future maybe has to be tailored around the fact that i have to deal with this problem. >> reporter: is this going to affect the way you vote in the next election? >> it definitely will, yeah. i'll look at candidates' plans and see who wants to help. >> not a lot of people are looking at long term and i think that's where a lot of people need to look at. >> reporter: walker hopes his lectures inspire enough young voters to hold washington accountable for their futures. diane eastabrook, "nightly business report" chicago. >> susie: meanwhile tonight's commentator looks at the economic realities facing the
nation's younger generation of workers and says he understands why they're angry. he's mike mandel, senior fellow at the progressive policy institute. >> the occupy wall street protests seem to be spreading across the country and around the world. i'm not going to speak about the group's tactics or demands, however, i do want to address some of the economic realities that are driving the anger. the fact is, taking inflation into account, earnings for young male college grads are down 19% since their peak in 2000. earnings for young female college grads are down 16% since their peak in 2003. these figures are for people who should be doing well, workers with a bachelors degree and a full-time job, 25 to 34 years old. prime working years. but this decline in pay shows no sign of bottoming out, much to my surprise. i had assumed that the job market for young people would have recovered by now. instead, we are seeing the ongoing impoverishment of young college graduates, who are often stuck with many thousands of
dollars of student debt. given these economic circumstances, the emergence of a group like occupy wall street is inevitable. what's more, this may be the beginning of the long-predicted struggle between young and old. i'm mike mandel. >> susie: you can keep up with nbr anytime. we're online at n.b.r. on pbs.org. there, you'll find all the market data from the program.. and you can follow us on twitter, @bizrpt, or my personal feed, @sgharibnbr. we're also on facebook at bizrpt. that's "nightly business report for tuesday, october 18." i'm susie gharib. good night everyone, and we hope to see all of you again tomorrow night. "nightly business report" is made possible by: